Grandparents who help with childcare at risk of missing out on full state pension – act NOW to protect it

Thousands of grandparents who have given up work to help look after their grandchildren could be missing out on a state pension boost worth £1,000s over the course of their retirement, new research has revealed. But you can act now to protect your pension.

Many older family members look after their grandchildren to allow the child's mother to go back to work, but it seems few know they could also be eligible to receive national insurance (NI) credits to compensate them for their time. For every year you don't claim NI credits, you could lose £231/year from your state pension.

A Freedom of Information request has revealed that in the 12 months to September 2016 only 1,298 grandparents took advantage of a Government scheme which allows them to receive transferred NI credits – even though an estimated 100,000 could be benefiting.

Sir Steve Webb, former pensions minister and now director of policy at the insurer Royal London, which obtained the figures, said: "[Eligible grandparents] can get an extra £231 per year, or say £4,600 or so over a 20-year retirement – so it's worth having. The trouble is, hardly anyone is claiming it.

"My FOI reply shows that an average of just two grandparents per parliamentary constituency – less than 1,300 UK-wide – are claiming the credit. I reckon there could easily be 100,000 working-age grandparents who should be benefiting."

If you're a grandparent who's retired early to help look after your grandchildren, here's how to ensure you don't miss out on pension entitlement. For full help, see our Childcare Costs Help guide.

How does the scheme work?

The Government scheme – technically known as 'specified adult childcare credits' – was introduced five years ago, and is designed to protect the pensions of grandparents who retire early to help care for grandchildren so their parents can go back to work.

A parent (usually the mother, though it can be the father) who gets child benefit for a child under 12 automatically gets NI credits towards their state pension. But a mum who goes back to work and pays NI doesn't need the credit because she gets a qualifying year anyway.

Under the scheme, a mum can sign a form and pass the NI credit to the grandparent who is actually looking after the child. This means the grandparent benefits from the NI credit and it goes towards their state pension instead.

Why do NI credits matter?

If you retired before April 2016, you need 30 qualifying working years to get the full state pension. If you retired or will retire after April 2016, that's raised to 35 years. (See our State Pensions guide to find out more about qualifying NI years.)

If you're looking after grandchildren, and you need extra qualifying years, it's worth getting recognition for the childcare you provide. But you need to claim the extra NI credits – they won't automatically be added to your NI record.

So who's eligible to claim these NI credits?

You can apply for specified adult childcare credits if:

You're a grandparent, or other family member, caring for a child under 12.

You're under state pension age.

You live in the UK (and not the Channel Islands or the Isle of Man).

The child's parent (or main carer) is entitled to child benefit and has a qualifying NI year meaning he or she doesn't need the NI credit you receive automatically with child benefit.

The child's parent (or main carer) agrees to your application.

For grandparents to be eligible for the NI credits, working parents need to give up the NI credits they receive when they claim child benefit and transfer them to the grandparent doing the caring.

Your application will be rejected if:

You already have a qualifying year of national insurance – usually because you work or receive other NI credits.

You're receiving child benefit for the child – in that case, you'll already get the parent's NI credits automatically.

The number of hours a grandparent helps out with childcare is irrelevant to the claim. So even if it's just one day a week, eligible grandparents should be able to claim.

For every year you don't claim NI credits, you could lose £231/year from your state pension

How do I make a claim?

If you cared for your grandchild in the last tax year, you can apply for the NI credit to be transferred from the October after the end of that tax year. So, right now, it's possible to apply if you cared for a grandchild between April 2015 and April 2016 – you'll have to wait until October 2017 to claim for the 2016/17 tax year.

To apply, the grandparent or the parent who's transferring their NI credits needs to fill in the catchily titled form CA9176 and send it off to HMRC. The grandparent and parent must sign the form.

If you have any difficulties you can call the national insurance helpline on 0300 200 3500.

How do I claim for previous years?

You can claim back for previous tax years if you were eligible – this national insurance credit was introduced in April 2011, meaning you claim as far back as the 2011/12 tax year if necessary. That could add up to an extra £1,000 or so in basic state pension, on top of the estimated £4,600 over a typical 20-year retirement.

Where more than one person is sharing responsibility for caring for a child under 12, the child benefit recipient is responsible for deciding who should receive the transferred credits.

The Department for Work and Pensions (DWP) says it is technically possible for grandparents to share the credits, but it's complicated. A spokesperson said: "For example, if there is more than one child to care for, and caring responsibilities are shared between more than one carer for the same period, the child benefit recipient can authorise applications for two or more carers for the same tax year."

If you're in this situation, it's worth asking the DWP for guidance.

What if the parent works part-time?

If a grandparent looks after a child while the parent works part-time it's still possible to transfer the child benefit credits provided the parent themselves has a complete NI record for the year.

What if the grandparent works part-time?

The NI credits can be combined with any part-time work in the financial year.

What if there's more than one child and/or more than one grandparent has a share in the care?

Here's where it gets a little more complicated.

Where more than one person is sharing responsibility for caring for a child under 12, the child benefit recipient is responsible for deciding who should receive the transferred credits.

If there is more than one child to care for and caring responsibilities are shared between more than one grandparent for the same period, the child benefit recipient can authorise applications for two or more grandparents for the same tax year.

However, the application would need to make clear which weeks in the year each person had provided care for as only one application for any individual week would be accepted.

If you're struggling to get your head around this and think these circumstances apply to you then the best thing to do would be to contact the National Insurance helpline on 0300 200 3500.

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